Convergence of Accounting Standards and the IASB Process

1
Convergence of Accounting Standards and the IASB
Process

• Gilbert Gelard, Member of IASB
• Bucharest, May 2003

2

• Harmonisation? No
• Convergence? Yes

3
Harmonisation

• European Directives of the 1970s aimed at
  harmonisation
• Did not succeed
• Hence, choice of a single set of standards for
  Europe (2002 2005) to ensure a level playing
  field for listed companies

4
Why harmonisation failed

• A bottom-up approach
• No conceptual basis
• No real desire to move from ones habits
• Too much linkage with taxation and law
• Little progress, uneven playing field

5
Convergence

• Aim One single set of standards
• Means Partnership between IASB and (key)
  National Standard Setters through
• Joint projects
• Monitoring
• Enhancement of communication

6
Requirement for convergence of accounting
standards

• Sharing a common conceptual framework
• Working under effective partnership(s)
• Choosing the best alternative, whatever its
  origin is
• Mechanism for consistent interpretations
• Consistent accounting standards

7
Requirement for consistency and convergence in
practice

• Having compulsory consistent accounting standards
  and
• A strong enforcement, including strong
• Regulation (law, market, regulation)
• Auditing (competence, independence, oversight)
• Governance
• Standards can achieve nothing by themselves.
  Enforcement is the key

8
IASC Foundation International Accounting
Standards Board

• The Organisation

9
IASC Foundation Structure
IASC Foundation (19 Trustees)
Standards Advisory Council
IFRIC Interpretations Committee
IASB 12 Full time
2 Part time
Advisory Groups
21 Tech.Staff
10
IASC Foundation Trustees
11
IASB Composition
12
Logistics

• Monthly IASB meetings
• Regular meetings with 8 liaison standard setters
• SAC meetings 3 times per year
• IFRIC meetings 6 times per year

13
Liaison Standard-setters

• FASB
• UK
• Canada
• France

• Australia
• Germany
• NZ
• Japan

14
Partnering Arrangements

• Bi-lateral between IASB and 1 of liaison
  standard-setters
• Lead, support and monitoring roles
• Commitment to accept outputs

15
Process

• Full due processes, as applied by national
  standard-setters
• Partnering arrangements with liaison
  standard-setters

16
IASB outputs for the first two years up to May
2003

• Exposure Drafts
• Improvements to twelve standards
• Amendments to IAS32 IAS39
• First time adoption ED1
• Share based payments ED2
• Business Combinations ED3
• with consequential amendments to Impairment and
  to Intangible Assets

17
IASB Expected out put up to March 2004

• Standards
• IFRS 1 First time adoption
• Business combinations I
• Share based payments
• Insurance contracts (phase I)
• Improvements to twelve standards
• Amendments to IAS32 IAS39
• Exposure Drafts
• Performance reporting
• Business combinations II
• Deposit taking, lending and securities activities
• With a view to implementation in Europe as of
  January 2005

18
SMEs and Emerging Markets

• Option to member states to extend IFRSs beyond
  the consolidated accounts of limited companies
• The IASB has recently formed a group to deal with
  the very difficult issue of SMEs. Very
  preliminary stage